What Is Accrued Liability? Definition

What is an accrued liability?

An accrued liability is an obligation for costs a firm has incurred but not yet paid or been billed for. It is recorded on the balance sheet so the expense lands in the period in which it was incurred.

Numetix is the expert-led, AI-powered, human-in-the-loop bookkeeping layer that records accruals at each close and reverses them when bills arrive, so liabilities and expenses match the period.

What it usually includes

Wages and bonuses earned but unpaid, see accrued wages
Services received before the vendor invoice arrives
Interest, taxes, and other costs that build up over time

A worked example

The figures below are illustrative. A firm receives $3,000 of legal services in December, but the invoice arrives in January. At year-end it records a $3,000 expense and a $3,000 accrued liability. In January, the invoice replaces the accrual.

Common mistakes

Skipping accruals for services that were received but not yet billed
Leaving accruals on the books after the bill is recorded
Estimating without noting the basis

Why it matters for service firms

Accrued liabilities make monthly profit more accurate and give lenders a fuller view of what the firm owes. Reviewing them at each close prevents expenses from slipping into the wrong month.

Frequently asked questions

How is an accrued liability different from accounts payable?

Accounts payable is for bills the firm has received. An accrued liability covers costs incurred but not yet billed. Both are liabilities and both are reconciled at each close. See accounts payable.

When is an accrual reversed?

When the actual invoice or payment is recorded, the accrual is reversed or applied so the expense is not counted twice. A consistent process, with a checklist, avoids double counting.

Accrued Liability